Ethical Decision Making: Nike Case Study

Ethical Decision Making: Nike Case Study 1. OBJECTIVE The main objective of writing this report is to help students gain a deeper understanding regarding the course CBEB 3101 Business Ethics. Through this course, we get to learn how to make ethical decisions in a company. Some of the principles that we have learned are the principle of utilitarianism and principle of rights. By writing this report, we get to learn how to apply the theories learned in lectures into real life cases and situations. Different situations have different theories and principles. We also get to learn the proper steps in the decision making model, which are determine the facts, identify the ethical issues involve, identify stakeholders and consider the situation from their point of view, consider available alternative, consider how a decision affects stakeholders, make a decision and monitor outcomes. Besides that, we get to build stronger relationships among our group members. All the time spent together discussing and analyzing the case study helps to strengthen our bond and molds us into becoming a more responsible person in the future. We also get to see the corporate world from a different point of view, whereby being ethical is very important. 2. INTRODUCTION Phil Knight and Bill Bowerman are the founders of Blue Ribbon Sports in the year 1964. Later, it was renamed as Nike in the year 1978 whereby it received its name from the Greek goddess of victory. Nike has become the worlds major supplier for athletic shoes and sport apparels. As to remain competitive in the market, Nike searched for cheaper resources and markets. Therefore, Nike had shifted its production to lower manufacturing cost countries such as Japan, Korea and Taiwan. Later in the 1980s, production had moved to Southern China. However, as Japans economic started expanding, the manufacturing cost increased. Therefore, Nike shifted its contracts to Vietnam, Indonesia and China. Starting from the mid 1990s, there were criticisms from human right protectors and media regarding labour health and safety conditions, low wages and discrimination in the hiring and firing process. Therefore, Nike started to take actions as to rescue its reputation. Since 1991, Nikes corporate social responsibility practices started evolving. As time passed, Nike revised its code of conduct and became more ethical in its manufacturing practices. In 1998, Nikes revenues and stock prices had decreased dramatically. Due to that, Nike laid off 1600 workers. Nike then immediately started to launch several public relations campaigns as to reduce the damage to its reputation. A code of conduct was implemented with Global Alliances to review all of Nikes factories. On August 1996, Nike Corporation joined the Apparel Industry Partnership to draft a code of conduct for the usage of the whole industry. In 1998, audit tools were developed to increase the transparency in order to evaluate the compliance with the company standard, Nikes Code Leadership Standards by those subcontractors. In addition, Bike had disclosed the names and locations of its subcontractors factories in the year 2000. The reason for disclosing its supply chain was to enhance monitoring and make changes. The Corporate Responsibility Board was developed during the year 2001. The purpose of the board is to review the policies and activities and therefore, make recommendations to the board of directors regarding labour and environmental practices. The organizational environment of Nike is a competitive market. In order to remain competitive, Nike had moved the production to poorer nation countries where low cost labour was attainable. Therefore, Nike subcontracted its production to other countries without proper regulation on the working conditions of workers and wages. Simple time line of events Year Descriptions 1964 Phil Knight and William Bowerman founded Blue Ribbon Sports. 1965 Jeff Johnson signed an agreement with Blue Ribbon Sports to be a full time employee. 1966 Jeff Johnson opens the first Blue Ribbon Sports retail outlet in Santa Monica, California. Phil Knight and William Bowerman signed a formal written Partnership. 1967 Company was incorporated and named as Blue Ribbon Sports Inc. 1971 Swoosh trademark is created by a graphic student named Carolyn Davidson for a fee of $35. Jeff Johnson dreams of Nike, the Greek goddess of victory. 1972 Litigation on distribution and broke the business relationship between Blue Ribbon Sports and Onitsuka Tiger. 1973 Romanian tennis star Ilie Nastase was the first professional athlete who signed the endorsement contract with Blue Ribbon Sports to wear Nike Shoes. 1977 Blue Ribbon Sports starts the first US track and training club called Athletics West. 1978 Blue Ribbon Sports officially change its name to Nike. 1981 Nike begins promotional efforts in China by supplying the national basketball team with sports apparel and footwear. 1988 Nike acquired Cole Haan which is the producer of mens and womens footwear, outerwear and accessories. 1993 Nike introduced a program called Reuse A Shoe which collects athletic shoes and makes athletic courts and fields. 1995 Reuse A Shoe began to collect old shoes from Nike retail stores. 1998 Phil Knight set standards for Nike subcontracted factories: minimum age, air quality, mandatory education programs, expansion of microloan program, factory monitoring and increase the transparency of Nikes corporate social responsibility practices. 1999 Bill Bowerman died at the age of 88. 2001 Nike developed a Corporate Responsibility (CR) Board to review the policies and make recommendations to the board of directors on labour and environment practices. 2002 Nike partnered with National Recycling Coalition to set up the drop off stations in Europe and Australia. 2004 Phil Knight stepped down as CEO and president of Nike but continues to work as chairman in Nike. 2. ISSUES AND ANALYSIS Issue 1: Nikes Manufacturing Practices on Sweatshop Summary To be competitive in the market as well as keeping the manufacturing costs low, Nike had shifted its contract to low labour cost countries such as China, Vietnam Indonesia, Pakistan and etc. Nikes reputation was damaged especially due to accusations on human and labour rights violations by labour rights activists and the mainstream media. The accusations were deficiencies in working environment, health and safety conditions and low wages and indiscriminate in hiring and firing practices in the factories. Roberta Baskins CBS had reported about the conditions in Nikes manufacturing factories in Indonesia. Even though subcontracted work to poor nations had created employment, the pay was merely $1.60 a day to Vietnam factory workers when the living wage is around $3 per day (Hill, 2009). In this situation, is it ethical for Nike to treat its labourers this way? Analysis We can evaluate the practices by using these principles: Utilitarianism Utilitarianism is a moral theory whereby we should act in ways that produce the most pleasure or happiness for the greatest number of people affected by our actions. By using utilitarian reasoning, the following are the good and bad consequences: Good Consequences Bad Consequences Increase profitability of the company. Labourers welfare are ignored. Shareholders wealth is maximised. Company reputation has been affected badly by those practices. Customers loyalty towards the company becomes a doubt. From the overall consequences, even though increasing profit of the company can ensure the shareholders wealth, it is more important to take care of their employees welfare and gain trust and maintain a profitable relationship with its customers. This is because employees and customers are the primary stakeholders of the company who have the ability to influence the business of the company and especially those whose continual association is necessary for a firms survival. Therefore, in the long term, it is found that the unethical practices of Nike had negatively influenced stakeholders and changed the perception of the shareholders towards the company. Principle of Rights The basic human rights under Kantian are the rights that are the result of particular roles, special relationships or specific circumstances. Nike as an employer should consider the rights of its employees to have a safe working environment and a competitive wage instead of being a sweatshop labour. Although Nike is doing a much better job with foreign labour relations compared to other corporations, Nike should not be comparing itself to other companies. Rather, it should be holding itself to the absolute highest ethical standards it can attain. Principle of Duty Based on this principle, rightness of our actions depends on whether we perform our duties. If we fail to carry out our duties in the society, our acts are considered unethical or wrong. In our opinion, we feel that all the contractual factories in developing countries or any further subcontracted out work of Nike has a moral duty to ensure the health and financial well-being of all the people who work for it. Categorical Imperative Principle of universalizability mentions that we should treat others the way we want to be treated. Nikes management team should put themselves in the labourers shoes and they will find out that they would not want their employers to violate their rights to have safe working conditions and fair wages. As a result, Nikes practice on sweatshop labour is wrong. Therefore, it has to work on its corporate responsibilities to make sure its practices have improved. Besides that, principle of ends means that we must respect humanity and never exploit others to achieve our own benefit or purpose. Nikes act of exploiting other human beings such as the sweatshop practice is to serve its own interest which is to maintain low manufacturing cost. Principle of Equal Liberty Each person has an equal right to be treated equally under the principle of equal liberty. Obviously, Rawls would disagree with Nikes labour and business practices as it is unethical for Nike to overwork its employees or perhaps pay them meager wages just so it can supply shoes to America. Besides that, in order to fulfill the expectation as an employer, it is necessary to appreciate individual diversity and become more dedicated to offering equal opportunity to each individual. Issue 2: Nikes Manufacturing Practices on Child Labours Summary In this issue, Nikes contracted factories hire children to work overtime at below minimum pay as the children are not capable to make right decisions and unable to differentiate pros and cons of certain matters. Hence, children have been exploited to work for the subcontracted factories. The issue being is: whether it is ethical for Nike to hire child labours to reduce manufacturing cost? Analysis Utilitarianism Based on utilitarianism, below is the comparison of good and bad consequences of this issue: Good Consequences Bad Consequences Nike gets cheap labour and low cost facilities and therefore, low cost of production allows Nike to set lower price on its product to attract more consumers. Children suffer psychological and physical harms. Bring in foreign investments and job opportunities and therefore, alleviate poverty level for the countries that Nike are operating in. Denied opportunities for childrens education. Extremely low pay still cannot alleviate poverty of the countries. From the overall consequences to the entire society, Nike had violated the theory of utilitarianism As one of the largest multinational companies, Nike should have carefully evaluated the outcome of using low cost labours. From the analysis, hiring child labours to serve its own interest to keep low labour cost is unethical. Principle of Rights Children have their right to get their education instead of working as they are under age according to the law of the country. Therefore, Nike should not hire child labour which violates their right to stay in school and receive education. Categorical Imperative Under the principle of universalizability, Nike should put itself into the situation of the child and will realize that it also does not want to work under such working conditions with such a low pay. Nike also should not exploit the children to serve its own interest to keep the low labour cost because the act is unethical according to the principle of means. Principle of Equal Liberty Children in Nikes contracted factories countries should be given an equal opportunity and treated as the children in other country as they are underage to work and supposed to have their education. Issue 3: Contract between Nike and University of North Carolina Summary In order to work on CSR after the incident which deeply affected the companys reputation, Nike had entered into a social contract with the University of North Carolina. Nikes contract requires all UNC athletes to wear its brand. In this issue, whether is it ethical to bind all UNC athletes under the contract? Analysis Utilitarianism Based on this concept, there are some benefits from the contract, such as, Nike has pumped in money which brings pleasure to the athletic department and the student athletes by virtue of wearing Nikes brand, improving Nikes reputation and rebuilding their confidence in public. However, the university should consider how the contract would affect the academic integrity and goals of the institution. It is more important to look at the issue from the perspective of athletes and the institution which will bring more consequences to the firm. Rawls theory of individual liberty Under this theory, it will disagree with the contract for the lone reason being the athletes have lost their individual rights to chose whether or not to wear Nikes brand. Even if the institution has maximized pleasure for itself, at the same time it infringes on the choice of its athletes. There is no right for the social institution to take away a basic individual right. Besides that, Nike also should not restrict the individuals right to have their own choice to wear other companys brand. Principle of Duty According to this principle, the University also has a moral responsibility to itself and Nike. It is morally obligated to use its position of power to encourage Nike to work harder to improve its business practices. Besides that, it also has a moral obligation to back out of a contract with any corporation that lacks ethical business integrity. Issue 4: Enhancing Nikes images by using endorsers Summary In this issue, Nike has signed with some well-known athletes as its endorsers to project a better athletic image for itself. For example. Nike has signed an endorser contract with famous basketball legend, Micheal Jordan. According to the contract, Nike has created more revenue from his fans with launching more new series of producst. In return, Nike paid 20 million per year to Micheal Jordan as its endorser. At the same time, labourers at its contract factories were paid low wages which was just above the minimum standard. In this issue, is it ethical for Nike to pay its labors and endorses unfairly? Analysis Utilitarianism Based on this principle, it solely benefits the company and the endorser while the labourers suffer from low wages. It is more beneficial to every party if Nike can use the money paid to the endorser and spend some on its employees welfare. Therefore, we think that Nike is unethical to pay its endorser such a large amount of money instead of taking care of its employees welfare. Principle of Right Under this issue, the employees have the right to get fair wages and deserve to get better treatment. Principle of Universalizability It is unethical for Nike to treat its employees as an end for themselves and never only as a mean to its own ends. Principle of Justice Employees should have fair wages and deserve to get their welfare whereby Nike should treat them equally with its endorsers. It is unfair to pay the endorsers so high but not taking care of its employees welfare. Actions taken From the case study we know that the corporate culture in Nike did not have a strong ethical focus which was to encourage its employees of the factories in many other countries to practice the ethical behaviours in the past. However, Nike then implements some efforts to instil ethical behaviours and practices and later became an ethical corporate in the industry after going through some critical period with negative issues on its business practices. In our opinion, we feel that Nike has used the integrity-based approach which is a value-driven approach with emphasis on employee responsibility for ethical conduct. It is a better approach which the employees are instructed to act with integrity and conduct business dealings honestly. Besides that, Nike may set goals of an integrity-based approach as it is a broader and more expansive application to the firm. For example, maintaining brands and reputation by ensuring the good quality of products and honesty to its consumers, and creating a better working environment for employees whereby the safety of employees is emphasized. Furthermore, we think that currently Nike focuses on the stakeholder theory instead of shareholder theory in its firm. All the stakeholders groups and their well being should be taken into account whenever the company wishes to take any significant managerial decision but not merely focus on financial and economic relationships with owners. In the past decade, Nike has taken CSR as its social contract. For example, University of North Carolina had entered into a corporate sponsorship agreement with Nike. On the other hand, Nike also undertook CSR because of its enlightened self-interest where CSR activities bring commercial returns to the firm. Especially after the damage by the media to the companys reputation, Nike started to undertake CSR activities in order to enhance its reputation and rebuild its good image. However, Nike now meets its standard for being a good corporate citizen after making progress for years. Corporate Social Responsibility It is a reactive concept where businesses try to do the minimum to fulfil the expectation of stakeholders. In the article, there are some discussions on Nikes CSR practices: Environmental Sustainability Nike had developed ReUse-A-Shoe Program and then expanded it by partnering with the National Recycling Coalition to promote environmental-friendly practices and encourage consumer about this issue. Code of Conduct This is the first step taken by Nike to improve the working conditions in its factories. It complies with the principle of justice, fulfils the duties as an employer to reach the desired level of employer responsibility. Other than comply with the laws and regulations, the company also strives to satisfy the expectation as a leader. Factory Transparency This is the corporate social responsiveness undertaken by Nike as it is the proactive actions where the firm anticipate the needs of stakeholders and try to fulfil those needs before the stakeholders demand them to do so. Nike had publicly disclosed its supply chain as it believes that can be more successful in monitoring and making changes as once issues have been uncovered, not only in its own factories but in an industry-wide basis. Furthermore, implementation of Balanced Scorecard for its suppliers helps the firm better assess factory compliance with the code of conduct. Corporate Responsibility Board Nike developed a Corporate Responsibility Board in 2001 to review policies and activities and make recommendations to the board of directors regarding certain important fields. Through the effort of the CR board, there were significant improvements in its business practices whereby the employees are now aware of their rights and have the opportunity to be educated and well-trained. Philanthropy Each year, Nike proactively donates product and contribution in cash to non-profit organizations and NGOs creating social changes through sports disaster relief efforts around the world. Nowadays, Nike has focused on innovation, collaboration, transparency and advocacy to prepare the company to thrive in a sustainable economy. There are some important initiatives for the company that are included in the CR report which includes Considered Design, GreenXchange (GX), Lean and Human Resource Management (HRM), Sport for Social Change, Energy and Climate Change Strategy. In 2008, Nike launched a footwear energy efficiency program with five contract manufacturers. Nikes commitment to collaboration on this project has shown excellent early results where the contract factories absolute CO2 footprint was down 6 percent despite a 9 percent increase in production. 4. RECOMMENDATIONS Due to the ethical issues discussed in the Nike case, we have come up with several recommendations on how to solve the problems occurred throughout the case. We hope that this can also serve as a guideline to other companies as well. First of all, the company management should be stricter on the rules and standards set by themselves. This will make sure that they follow or obey the rules of the company. In this case, the top management of Nike in the US should ensure that all the other retail outlets or factories all around the world follow a standard procedure in everything that they do. This will help them in monitoring all the other outlets around the world. This can also help avoid the issue of poor conditions, child labour, widespread harassment and abuse that has happened in some countries. When other manufacturers all over the world know the standard and code of ethics that they should follow, they will not do what they have done that caused all the issues to arise. This is because they have a guideline to follow and they know that whatever procedure that they are doing will be monitored by the top management. The top management should make sure that they provide a healthy and safe workplace for all its em ployees. This is because their employees have the right to be in a healthy and safe workplace. A poor condition of the workplace is wrong and is one of the main allegations that Nike had to deal with. Next, the management team and employees should also be sent for training once in awhile. This is important as it helps to establish a better corporate culture. This culture shapes the people who are members of the organization as it is a blend of ideas, beliefs, customs, traditional practices, company values, and shared meanings that help define and guide normal behaviour for everyone who work in a company. It is important to continuously train its employees so that the employees become more disciplined and responsible. They will always think of the best interest of the company and not be easily influenced by other factors that might bring the company down. This will help them have a sense of accountability and responsibility towards the company. One of the main issues that Nike was facing was child labour. Therefore, we have come up with an idea that might help solve this problem. Nike began to offshore its production of footwear and other sporting equipment because it wanted to remain competitive and keep manufacturing cost at a low. To solve this, instead of using child labour, Nike can actually install and use machines in it production. At the beginning it might be a little costly but in the long run, it will help the company save a lot of money. It is not only faster, but it also helps Nike save money in the long run and the management does not have to worry about any child labour allegations or poor working conditions. Besides that, the top management of Nike can also perform employee monitoring. The kind of employee monitoring meant over here is checking out the work done by the employees. They could perhaps send some spies or third parties to see how the employees perform their work but at the same time not let the employees know that they are being watched. Lastly, the ethics and compliance system should also be improved. Currently, there is only one person in charge of ten factories and inspection is only done for about 25 percent of the factories. The top management should make sure that it inspects every factory. This can be done by setting up a chart or timeline whereby they have already discussed and come to an agreement on when and which factory should be inspected throughout the year. This is a more systematic approach and the management must make sure that they follow what they have drawn up. CONCLUSION Running a company as big as Nike is definitely not an easy job as the management has to satisfy not only the shareholders of the company, but the stakeholders too. No matter what has happened in the past, Nike has learned its lesson. Remaining competitive and keeping manufacturing costs at a low should not be the only objective of the company. Due to its negligence in certain areas, Nikes allegations of poor conditions and child labour has become a global issue. This is not only bad for Nikes image but it has permanently tarnished its reputation. However, Nike never gave up and has continued to win back the hearts of its stakeholders by carrying out a lot of CSR. Even though it may still have a long way to go in the area of corporate responsibility, it can be seen that it is slowly receiving good responses from the industry. Nike will always continue to be a major brand throughout the whole world.

Contract and United Airlines

Cardillo Travel Systems, Inc. ACT 1 Russell Smith knew why he had been summoned to the office of A. Walter Rognlien, the 74-year-old chairman of the board and chief executive officer (CEO) of Smith’s employer, Cardillo Travel Systems, Inc. Just two days earlier, Cardillo’s in-house attorney, Raymond Riley, had requested that Smith, the company’s controller, sign an affidavit regarding the nature of a transaction Rognlien had negotiated with the United Airlines.The affidavit stated that the transaction involves $203,000 payment by United Airlines to Cardillo but failed to disclose why the payment was being made or for what specific purpose the funds would be used. The affidavit included a statement indicating that Cardillo’s stockholders’ equity exceeded $3 million, a statement that Smith knew to be incorrect. Smith also knew that Cardillo was involved in a lawsuit and that court injunction issued in the case required the company to maintain stockhol ders’ equity of at least $3 million.Because of the blatant misrepresentation in the affidavit concerning Cardillo’s stockholders’ equity and a sense of uneasiness regarding United Airlines’ payment to Cardillo, Smith had refused to sign the affidavit. When Smith stepped into Rognlien’s office on that day in May 1985, he found not only Rognlien but also Riley and two other Cardillo executives. One of the other executives was Esther Lawrence, the firm’s energetic 44-year-old persistent and chief operating officer (COO) and Rognlien’s wife and confidante. Lawrence, a long-time employee, had assumed control of Cardillo’s day-to-day operations in 1948.Rognlien’s two sons by a previous marriage had left the company in the early 1980s following a power struggle with Lawrence and their father. As Smith sat waiting for the meeting to begin, his apprehension mounted. Although Cardillo had a long and proud history, in recent years the company had begun experiencing serious financial problems. Founded in 1935 and purchased in 1956 by Rognlien, Cardillo ranked as the fourth-largest company in the travel agency industry and was the first to be listed on a national stock exchange. Cardillo’s annual revenues had steadily increased after Rognlien acquired the company, approaching $100 million by 1984.Unfortunately, the company’s operating expenses had increased more rapidly. Between 1982 and 1984, Cardillo posted collective losses of nearly $1. 5 million. These poor operating results were largely due to an aggressive franchising strategy implemented by Rognlien. In 1984 alone that strategy more than doubled the number of travel agency franchises operated by Cardillo. Shortly after the meeting began, the overbearing and volatile Rognlien demanded that Smith sign the affidavit. When Smith steadfastly refused, Rognlien showed him the first page of an unsigned agreement between United Airlines and Cardill o.Rognlien then explained that the $203,000 payment was intended to cover expenses incurred by Cardillo in changing from American Airlines’ Apollo system. Although the payment was intended to reimburse Cardillo for those expenses and was refundable to United Airlines if not spent, Rognlien wanted Smith to record the payment immediately as revenue. Not surprisingly, Roglien’s suggested treatment of the United Airlines payment would allow Cardillo to meet the $3 million minimum stockholders’ equity threshold established by the court order outstanding against the company.Without hesitation, Smith informed Rognlien that recognizing the United Airlines payment as revenue would be improper. At that point, â€Å"Rognlien told Smith that he was incompetent and unprofessional because he refused to book the united payment as income. Rognlien further told Smith that Cardillo did not need a controller like Smith who would not do what was expected of him†. ACT 2 In No vember 1985, Helen Shepherd, the audit partner supervising the 1985 audit of Cardillo by Touche Ross, stumbled across information in the client’s files regarding the agreement Rognlien had negotiated with United Airlines earlier that year.When Shepherd asked her subordinates about this agreement, one of them told her of a $ 203,000 adjusting entry Cardillo had recorded in late June. That entry, which follows, had been approved by Lawrence and was apparently linked to the United Airlines-Cardillo transaction: Dr ReceivablesUnited Airlines$203,210 Cr Travel Commissions and Fees203,210 Shepherd’s subordinates had discovered the adjusting entry during their second-quarter review of Cardillo’s form 10-Q statement. When asked, Lawrence explanation without attempting to corroborate it with other audit evidence.After discussing the adjusting entry with her subordinates, Shepherd questioned Lawrence. Lawrence insisted that the adjusting entry had been properly recorded. Shepherd than requested that Lawrence asks United Airlines to provide Touch Ross with a confirmation verifying the key stipulations of the agreement with Cardillo. Shepherd’s concern regarding the adjusting entry stemmed from information she had reviewed in the client’s files that the United Airlines payment to Cardillo was refundable under certain conditions and thus not recognizable immediately as revenue.Shortly after the meeting between Shepherd and Lawrence, Walter Rognlien contacted the audit partner. Like Lawrence, Rognlien maintained that the $203,000 amount had been properly recorded as commission revenue during the second quarter. Rognlien also told Shepherd that the disputed amount, which United Airlines paid to Cardillo during the third quarter of 1985, was not refundable to United Airlines under any circumstances. After some prodding by Shepherd, Rognlien agreed to allow her to request a confirmation from United Airlines concerning certain features of the agreement.Shepherd received the requested confirmation from United Airlines on December 17, 1986. The confirmation stated that the disputed amount was refundable through 1990 if certain stipulations of the contractual agreement between the two parties were not fulfilled. After receiving the confirmation, Shepherd called Rognlien and asked him to explain the obvious difference of opinion between United Airlines and Cardillo regarding the terms of their agreement with the chairman of the board of United Airlines. â€Å"Rognlien claimed that pursuant to this confidential business arrangement, the $203,210 would never have to repaid the United.Shepherd’s conversation with Rognlien refused. In fact, as Rognlien knew, no such agreement existed. † A few days following Shepherd’s conversation with Rognlien, she advised William Kaye, Cardillo’s vice president of finance, that the $203,000 amount could not be recognized as revenue until the contractual agreement wi th United Airlines expired in 1990. Kaye refused to make the appropriate adjusting entry, explaining that Lawrence had insisted that the payment from United Airlines be credited to a revenue account. On December 30, 1958, Rognlien called Shepherd and told her that he was terminating Cardillo’s relationship with Touche Ross.In early February 1986, Cardillo filled a form 8-K statement with the Securities and Exchange Commission (SEC) notifying that agency of the company’s change in auditors. SEC regulations required Cardillo to disclose in the 8-K statement any disagreements involving accounting, auditing, or financial reporting issues with its former auditor. The 8-K, signed by Lawrence, indicated that no such disagreements preceded Cardillo’s decision to dismiss Touche Ross. SEC regulations also required Touche Ross to draft a letter commenting on the existence of any disagreements with Cardillo.This letter had to be filed as an exhibit to the 8-K statement. In touche Ross’s exhibit letter, Shepherd discussed that the improper accounting treatment given that transaction resulted in misrepresented financial statements for Cardillo for the six months ended June 30, 1985, and the nine months ended September 30, 1985. In late February 1986, Raymond Riley, Cardillo’s legal counsel, wrote Shepherd and insisted that she had misinterpreted the United Airlines-Cardillo transaction in the Touch Ross exhibit letter filed with the company’s 8-K.Riley also informed Shepherd that Cardillo would not pay the $17,500 invoice that Touche Ross had submitted to his company. This invoice was for professional services Touche Ross had rendered prior to being dismissed by Rognlien. ACT 3 On January 21, 1986, Cardillo retained KMG Main Hurdman (KMG) to replace Touche Ross as its independent audit firm. KMG soon addressed the accounting treatment Cardillo had applied to the United Airlines payment. When KMG personnel discussed the payment with Rognlien, he informed them to the alleged secret arrangement with United Airlines that superseded the written contractual agreement.According to Rognlien, the secret arrangement precluded United Airlines from demanding a refund of the $203,000 payment under any circumstances. KMG refused to accept this explanation. Roger Shlonsky, the KMG audit partner responsible for Cardillo engagement, told Rognlien that the payment would have to be recognized as revenue on a pro rata basis over the five-year period of the written contractual agreement with United Airlines. Cardillo began experiencing severe liquidity problems in early 1986. These problems worsened a few months later when a judge imposed a $685,000 judgment on Cardillo to resolve a civil suit filed against the company.Following the judge? s ruling Raymond Riley alerted Rognlien and Lawrence that the adverse judgment qualified as a â€Å"material event† and thus has to be reported to the SEC in a Form 8-K filling. In the me morandum he sent to his superiors, Riley discussed the serious implications of not disclosing the settlement to the SEC: â€Å"My primary concern by not releasing such report and information is that the officers and directors of Cardillo may be subject to violation of rule 10b-5 of the SEC rules by failing to disclose information that may be material to a potential investor. Within 10 days of receiving Riley’s memorandum, Rognlien sold 100,000 shares of Cardillo stock in the open market. Two weeks later, Lawrence issued a press release disclosing for the first time the adverse legal settlement or that Cardillo remained viable only because Rognlien had invested in the company the proceeds from the sale of the 100,000 shares of stock. Additionally, Lawrence’s press release, Roger Shlonsky met with Rognlien and Lawrence. Shlonsky informed them that the press released grossly understated Cardillo’s estimated loss for fiscal 1985. Shortly after that meeting, KMG res igned as Cardillo’s independent audit firm.EPILOGUE In May 1987, the creditors of Cardillo Travel Systems, Inc. forced the company into involuntary bankruptcy proceedings. Later that same year, the SEC concluded a lengthy investigation of the firm. The SEC found that Rognlien, Lawrence, and Kaye had violated several provisions of the federal securities laws. These violations included making false representations to outside auditors, failing to maintain accurate financial records, and failing to file prompt financial reports with the SEC, In addition, the federal agency charged Rognlien with violating the insider trading provisions of the federal securities laws.As a result of these findings, the SEC imposed permanent injunctions on each of the three individuals that prohibit them from engaging in future violations of federal securities laws. The SEC also attempted to recover from Rognlien the $237,000 he received from selling the 100,000 shares of Cardillo stock in April 1986 . In January 1989, the two parties resolved this matter when Rognlien agreed to pay the Sec $60,000

Acc/230 Week 6 Assignment

Week 6 Assignment: Candela Corporation Case Rebecca Mouser ACC/230 Financial Reporting: Peeking Under the Financial Hood November 4, 2012 Instructor Nathan McDaniel Week 6 Assignment: Candela Corporation Case Assignment: Candela Corporation Case Resource: Ch. 4 of Understanding Financial Statements * Compose a 500- to 750-word paper responding to questions 1 and 2 of the Candela Corporation Case on p. 146 (Ch. 4). * Format your paper according to APA standards. * Post your paper as an attachment. 1.Using the Consolidated Statements of Cash Flows, prepare a summary analysis for the years ended July 3, 2004, June 28, 2003, and June 29, 2002. Analyze the cash flows for Candela Corporation, Inc. for all three years. 2. Explain what information you gain from the statement of cash flows that cannot be found directly from the balance sheet or income statement. â€Å"Candela Corporation is a pioneer in the development and commercialization of advanced aesthetic laser systems that allow phys icians and personal care practitioners to treat a wide variety of cosmetic and medical conditions† (Fraser & Ormiston, 2007, pp. 46-147). After reviewing the corporation’s statement of cash flows for the years 2002, 2003, and 2004, it is clear that the company has taken on many changes financially. In 2002, Candela Corporation had a weak start with several losses compared to the years 2003, and 2004. In 2002, Candela had a net loss of $2,154 (thousands) compared to a net gain in 2003 and 2004. Candela Corporation had a significantly higher amount of loss in its net cash used in operating activities of $7,071 (thousands) compared to its net loss of $2,154 (thousands), a difference of $4,917.Candela Corporation also had a net loss in its investing activities of $1,058 (thousands), and a net loss in its financing activities of $5,141 (thousands). Candela also had a loss of $68 (thousands) on its income taxes for the year. In 2002, the company took a loss in the followi ng operating areas according to their statement of cash flows. Provision for deferred taxes $115 (thousands), tax benefit from exercised stock options $6 (thousands), effect of exchange rate changes on foreign currency denominated assets and liabilities of $305 (thousands).Account receivable $3,525 (thousands), notes receivable $54 (thousands), inventories $1,661 (thousands), and accounts payable $3,069 (thousands) and income tax payable $784 (thousands). Net losses in investing and financing areas include purchase of property, plant, and equipment of $1,058 (thousands), repurchases of treasury stock of $5,215 (thousands), and principle payments of long-term debt of $370 (thousands). In 2003, Candela Corporation had a net profit at the yearend of $6,814 (thousands) with a net cash used in operating activities of $11,655 (thousands); a significant difference from 2002.Candela Corporation still had a net loss in its investing activities of $1,227 (thousands) while they had a net profi t in its financing activities of $176 (thousands). Other net losses the company incurred in its operating, investing, and financing activities sections were provision for bad debts $13 (thousands), provision for deferred taxes $682 (thousands), and tax benefit from exercised stock options of $505 (thousands). Other areas are restricted cash $57 (thousands), account receivable $2,417 (thousands), accounts payable $1,409 (thousands).Accrued warranty costs of $921 (thousands), purchase of property, plant, and equipment $1,227 (thousands), net borrowings (repayments) on line of credit $1,114 (thousands), and principle payments of long-term debt of $3,330 (thousands). Candela Corporation seems to be most successful in 2004 according to its statement of cash flows. In 2004, Candela Corporation had a net income of $8,119 (thousands) and $1,132 used in net operating activities. Even though the company still had several losses in 2004 they were still able to profit from the last two years.Ot her net losses the company incurred in its operating, investing, and financing activities sections were tax benefit from exercised stock options of $1,223 (thousands), restricted cash $200 (thousands), accounts receivable $7,663 (thousands) and inventories of $2,134 (thousands). Other current assets of $2,550 (thousands), other assets $236 (thousands), accounts payable $91 (thousands), income tax payable $1,312 (thousands), and purchase of property, plant, and equipment of $685 (thousands).The income statement and balance sheet provides an adequate amount of information, but the statement of cash flows provides a clearer picture of what a company is doing and how well they are doing. The income statement and balance sheet provides information about the accounts receivable and the accounts payable as well as depreciation; the statement of cash flows also provides this information. â€Å"A company’s financial statements consist of the balance sheet, income statement and cash f low statement. The balance sheet summarizes the assets, liabilities and shareholders’ equity of the company.The income statement shows the sales-related activity over a period, which is usually a quarter of a year. The cash flow statement shows the cash inflows and outflows during a period. Financial information is important in assessing a company’s profitability, detecting problem areas and making investment decisions† (Basu, 1999-2012). References Basu, C. (1999-2012). The importance of Income Statement and Cash Flows. Retrieved from eHow: http://www. ehow. com/info_8274659_importance-income-statement-cash-flows. html Fraser, L. M. , & Ormiston, A. (2007). Case 4. 2 CandelaCorporation. Prentice Hall.

Women’S Health Plus. Tamer Almasri, Felicia Montgomery.

Women’s Health Plus Tamer Almasri, Felicia Montgomery Governors State University Professor Comer-Hagans Women’s Health Plus Diabetes is a disease in which your blood glucose, or blood sugar, levels are too high. Glucose comes from the foods you eat. Insulin is a hormone that helps the glucose get into your cells to give them energy. Larnson Wolk (2017) state in their article that with type 1 diabetes, your body does not make insulin and in type 2 diabetes, the more common type, your body does not make or use insulin well. Without enough insulin, the glucose stays in your blood. You can also have prediabetes. This means that your blood sugar is higher than normal but not high enough to be called†¦show more content†¦Unlike type 2 diabetes, women with type 1 diabetes do not appear to have an increased risk of breast cancer. In type 2 diabetes, the body does not produce enough insulin to function properly, or the cells in the body do not react normally to the insulin it does produce (insulin resistance). Being overweight, physically inactive and eating an unhealthy diet all contribute to our risk of developing type 2 diabetes. Approximately 90-95 percent of all cases of diabetes worldwide are of this type. Postmenopausal women 50 years or older who have type 2 diabetes have about a 20-27 percent increased risk of breast cancer. It’s not entirely clear why people with type 2 diabetes are at increased risk for breast cancer. Type 2 diabetes causes several changes that could increase breast cancer risk such as high glucose levels, high insulin levels and increased inflammation. Studies have shown a link between all of these changes and the development of breast cancer. In addition, many risk factors for developing type 2 diabetes and breast cancer overlap – such as being older, being overweight or obese and lack of regular physical activity. These risk factors may separately, and together, contribute to the increased risk of breast cancer in postmenopausal women with diabetes. Breast cancer is associated with type II diabetes, and a previous epidemiological stud y demonstrated that type II diabetes increased the risk of developing breast cancer by 10-20% (Irie,Banno,Aoki,n.d.). A